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Employee State Insurance (ESI) - Here is what you should know...

February 21, 2020

ESI Schemes

Employee State Insurance

The ESI Act was instigated with the intention of benefitting the factory workers and later on was made applicable to all organizations having 10 or more workers. As per statistics issued on March 31, 2016, the total beneficiaries of the ESI Act mounted to 82.8 million.

What is Employee State Insurance (ESI)?

Employee State Insurance (ESI) is a social security provided to the employees in India with reference to the health-related incidents happening during the tenure of their employment. The fund management in ESI is executed by Employee State Insurance Committee (ESIC) and the rules are applied as per the rules and regulations insisted on ESI Act 1948. The ministry heading the ESI is the Ministry of Labor & Employment, Government of India.

What are the ESI Contribution Rate Slabs?
  Earlier Rates

Current Rates(w.e.f 01/07/2019)           

Employee 1.75%






What are the Social Security Benefits of ESI?

In the recent years, there has been a predominant role played by Income Tax in ESI. As a result, we have today ‘Pehchan’ smart cards that come as part of ‘Project Panchdeep’. Apart from the ESU insured employees, underprivileged families are now eligible to benefit these ESI facilities enabled in ESI hospitals and dispensaries under ‘Rashtriya Swasthya Bhima Yojana’. There are also medical, nursing and paramedical schools in specific ESI hospitals run by the ESI Corporation. 
The benefits offered to the employees as per the ESI Act is briefed and listed below:

  • Sickness benefit
         Extended Sickness benefits
         Enhanced Sickness benefits
  • Maternity benefit
  • Dependents benefit
  • Disablement benefit
  • Other benefits
        Funeral expenses
        Vocational/Physical rehabilitation
        Old age medical care

What are Eligibilities Required for Employees to Avail ESI Benefits?

Employees who have a monthly income of RS.21000/- or below are eligible for ESI benefits. Earlier the income limit was RS.15000/- and it was only in 2017 the new income limit of RS.21000/- was set. 

Which Salary Inputs are measured for Determining ESI Contribution?

The main element determining the ESI contribution is the Gross Monthly Income of the Employee or Employer. Gross Salary is that amount of the income before making any deductions and this includes the following sub-elements:

  • Basic pay
  • Dearness Allowance (DA)
  • City Compensatory Allowance
  • House Rent Allowance (HRA)
  • Incentives
  • Attendance & Overtime
  • Payment of un-substituted holidays
  • Meal Allowance
  • Uniform Allowance
  • Other Special Allowances

The contributing element however does not include Leave Encashment, Gratuity on Discharge or Retirement, Retrenchment Compensation, Washing Allowance and Annual Bonus.

Which is the Latest ESI Changes Introduced?

  1. New Employee Enrollment: The portal will allow the registration of any new employee who registers in the ESI portal within 10 days of joining a new organization. After 10 days, the portal shall be set to ‘DISABLE’ to these new employees.
  2. ESI Permanent Card: Employees shall be provided with a biometric permanent ESI card once they successfully meet the formalities at their nearest ESI branch office.
  3. ESI Contribution Deposit Period: 42 days from the end date of contribution period, employees have to deposit their ESI contribution or else the portal will restrict the employees from making the contribution once they exceed the due date.
  4. Exemption of Wage Contribution: Employees with daily average wages not more than RS.176/- are exempted from paying employee contribution to ESI. The employer still will have to pay their share of the contribution, whereas the employees’ share of the contribution shall be paid by the government instead.

There has been several time-to-time reforms made by ESIC and in the now, there has been a reformation brought to ESI policy. As per the new modification made, the cost of living index is climbing and in par with this issue, the 181st EIC meeting held in the mid-week of February 2020 decided to increase the prevailing confinement expenses amount from RS.5000 to RS.7000. This will facilitate pregnant ladies who are unable to benefit the ESI advantages from ESI hospitals and dispensaries and depend on other hospitals, because of pressing issues that they face.

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